Evaluating Market Saturation for Real Estate Investors

Published February 13, 2023 by Real Estate Leads

So much is being made these days of how the run of ‘cheap money’ is coming to an end in Canada, and there’s likely a whole lot of truth to that. Interest rates aren’t likely to ever again go as low as they were in the early part of the last decade continuing until recently. But what it has already facilitated and something that won’t go away is the extent to which so many Canadians have become real estate investors given how affordable it has been to borrow money and invest it in real estate.

Real estate that has, for the most part, provided very nice returns on those investments given the overheated-market reality that has characterized real estate in much of the country for a long time now. Are fewer people investing in Canadian real estate now? Probably. Are there still thousands of Canadian with a major amount of their investments made in real estate, and with a need / wish / interest in further real estate investments to expand or diversify based on type? Absolutely.

Real estate agents works with investor clients all the time, and there is some worth in mentioning that finding new clients of this type may be more challenging in the immediate future too given how – as mentioned – money’s not so cheap anymore. But our online real estate lead generation system here at Real Estate Leads is an excellent way to continue to have new clients coming into the fold your real estate business and not seeing the same decline in them that you would otherwise if you didn’t have this resource working for you.

Back to topic, let’s have a look at what market saturation may be meaning for real estate investors in Canada now. It may be good information and knowledge to be relaying on to your clients based on what their prerogatives are with purchasing real estate.

Challenged Profitability

It’s well known that over a long stretch of recent years there has been many homeowners who sold their homes during the surge and were able to sell their homes for double the asking price and often for more than double what they paid for them. This worked out to many of these individuals taking advantage of the high demand and owning investment properties or rental property. Ones they would be willing to let go of should the opportunity to make a nice profit on the sale arise.

However, as we know all good things come to an end and we have seen home prices slowly start to decline over the course of 2022 and into this year. So this makes the real estate investing sphere a little cloudier and less inviting for people and some are suggestion that we’ve reached at least something of a point of market saturation given the level of investment made and then paired with the changing dynamics.

So what is market saturation? It is what happens when the volume of a product or service in a marketplace has been maximized. With saturation in place a company can only achieve further growth through new product improvements by taking existing market share from competitors or increasing overall consumer demand. With real estate and market saturation there are two main perspectives to consider: macro and macroeconomic.

The micro perspective looks at markets that aren’t providing new demand often due to intense competition. The macro perspective looks at markets that have already serviced their entire target audience and currently don’t have any new customer opportunities.

A saturated market may lead to investors taking certain strategies. One of them is lowering prices and done to a sufficient extent the market share can increase among customers when the price of a product or service decreases. Cutting costs in another one, and it can be a means to increase cash flow and market share. Diversifying is next on the list, moving into new markets or moving back into ones that were invested in previously.

Real Estate Market and Saturation

Understanding market saturation allows real estate investors and the real estate agents they’re working with to make strategic decisions. Real estate investments require knowledge and research on a specific area’s market and potential clientele. With the housing and rental market slowing as it has been for the past 8 months, the basic crux of the argument for real estate market investor saturation is that the supply of available units is slowly outweighing the number of buyers.

This can signify that the housing and rental market is saturated, but there are a few other things to consider as an investor in real estate. With average house prices and interest rates continuing to rise, there are more people renting instead of buying than ever before. That means matching larger numbers of people who are looking for new rental units.

But along with that there are more investors looking to deal with their own debt and build equity by renting out homes (or portions of them) to local market renters of all types. Others purchased another single-family home as a rental property to make some extra cash. As a results many investors and landlords out there are hoping to invest in units and then rent them out to speed their outright ownership of the property by taking advantage of the current super-high prices for rent in many Canadian cities.

One strategy for real estate investors dealing with market saturation is to be wise about the property they decide to buy, sell, and rent out to people in their city. It’s also important to make those rentals and new properties appealing to a wider group of people in order to reach more people. Clients may also want to have an idea of what they’d be willing to compromise on. Advise them to be willing to make sales in the future too as holding on to properties too long can mean missing out on money and great investment opportunities.


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